Deputy PM announces plans to reform private pension funds in Poland

Speaking at the Warsaw Stock Exchange on Monday, Deputy Prime Minister Mateusz Morawiecki said there are no plans to nationalise private pension funds (OFE) in Poland.

Wicepremier Mateusz Morawiecki. Foto: PAP/Jacek Turczyk

The statement came after Law and Justice leader Jarosław Kaczyński, addressing his party's congress on Saturday, spoke of “new proposals for society.”

One of the proposals concerns “what to do with the money left behind in the private pension funds, which is now depreciating and which could be the basis for new, important initiatives that will help boost the economy and serve to support a million Polish households,” Kaczyński announced.

On Monday, Deputy Prime Minister and Development Minister Morawiecki said that the private pension funds belong to the public and the government intends to “hand them over to Poles.”

The Cabinet’s new reform plan, the largest since 1999, is aimed at boosting “Poles’ financial security and economic growth,” Morawiecki said.

Plans include an overhaul of the so-called third pillar and the formation of accounts for workers and individuals. The reforms are to be implemented incrementally, with the first stage to be launched on 1 January 2018.

“The plan is to hand over the money from OFE, which is now […] a rudimentary pool of private capital,” Morawiecki said, adding that the third pillar is “practically non-existent as it was done away with by the previous government.”

In 1999, ten years after the fall of the Iron Curtain, Poland introduced a three-pillar system that cleared OFEs to receive 7 percent of tax-payers' earnings, which were subsequently invested in the stock market and government bonds. Simultaneously, Poland's public social security body ZUS was set to receive at 12.22 percent of citizens' yearly earnings.

However, owing to public debt, in 2011 the contributions to OFEs were curtailed to 2.3 percent, with the remainder going to ZUS.

In 2014, more than half of assets held by OFEs were transferred to ZUS under the previous Civic Platform government’s pension reforms. The changes introduced the option of choosing whether to transfer part of the pension contribution to OFE at all. (aba)